Royce Millar and Ben Schneiders

Former directors of the Peter MacCallum cancer hospital have denied knowledge of a secretive and potentially corrupt $250,000 payment to Kathy Jackson's union to settle a backpay dispute.

Three members of the board in 2003, when the payment to the Health Services Union No.3 branch was made, have gone public to say they were either unaware of the payment, or do not recall it.

The $250,000 payment is contentious because it was used to settle a dispute where scientists were owed, but did not receive, more than $3 million in back pay. Earlier this month, The Sunday Age revealed that the hospital board had received advice warning that a $250,000 payment to the HSU would risk serious criminal sanction under the Crimes Act for bribery.

A state government department also wrote to the hospital to oppose the payment to the HSU.

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Despite those concerns, the deal went ahead, raising serious questions about the conduct of Ms Jackson and the hospital, a highly-regarded institution that is funded by government and through donations.

Lack of knowledge of the payment at both board and staff level add to such concerns.

One former Peter MacCallum director, John Patterson, told The Sunday Age that if the board had have been aware of a proposal to pay money to the HSU, he would recall it. "It just seemed funny when I heard it [in the media]. We wouldn't do it. It wasn't right."

The payment to Ms Jackson's union has been a central issue this week at the royal commission into union corruption and finances.

Ms Jackson used the $250,000 as seed money for a personal bank account, and later spent thousands of it on herself including on international travel, her former husband, and at fashion boutiques.

The 150 research scientists who agreed to forgo back pay in 2003 were warned at the time they would lose their jobs if they pursued the claim. While Ms Jackson has claimed the payment to the union was disclosed to staff, several scientists have told Fairfax Media it was not.

This week hospital chair at the time Heather Wellington also told the royal commission she believed staff had been informed of the payment to the union. However, she was unable to provide evidence that this was the case.

"The board was very clear that disclosure needed to be affected and the board resolved formally on that on many occasions," she said.

Dr Wellington said she had a "very strong sense" there was discussion about the $250,000 payment at a meeting with staff in 2003. "But I can't quite pinpoint exactly what that was. It's too long ago for me."

In her speech to that meeting - provided to the royal commission - Dr Wellington thanked Ms Jackson for her handling of the 2003 negotiations, but did not mention the payment to the union. In her written witness statement to the commission Dr Wellington said: "Our position as a board was that there needed to be complete, frank and open disclosure to staff."

Lawyers say important to the question of whether a secret commission has been paid is if the payment was disclosed, its intent, and if the expenses paid were legitimate. Ms Jackson, under oath at the royal commission, admitted this week the $250,000 in costs - which she had said were for legal, staff and future costs to the HSU arising from the deal - were largely fabricated.

She admitted she had not told the truth about a bill to Slater & Gordon of $65,740 when the actual expenses to the law firm was just $1122. She also admitted her claim to the hospital that the union would incur $89,460 in "future expenses" was contrived to boost the total payment to the HSU to $250,000.

Dr Wellington said she thought the $250,000 was a fair estimate of the union's costs and future expenses. Other then board members, however, say they knew nothing of the payment.

Former director Noala Flynn said she recalled hearing about an agreement over the backpay, but she had no recollection of a payment to the union. "It just wouldn't be on, as far as I am concerned," she said. "We wouldn't be paying money to the union."

A third board member, Sue Carter, said she recalled nothing about such a payment. "It is very regrettable that Peter Mac has been drawn into the Kathy Jackson matter," she said.

Documents lodged with the royal commission also reveal that the Department of Human Services cautioned the hospital against such action.

Dr Wellington told the inquiry she did not remember receiving that advice in 2003. None of the other directors spoken to by The Sunday Age recalled such advice.

"If we had have been advised of a shifty deal and the department said 'no go' we would not have done it," Mr Patterson said.

"Because we depend on the department for money and their support. And we're governed by them. We would have been committing suicide to do it. Whether it [the payment] was done through our staff, I don't know."

Asked about the warning from the department, Ms Carter said: "I'm completely in the dark about that. I can't explain it."